Gujarat High Court quashes GST orders on cotton seed oil cakes

The Gujarat High Court has quashed orders that had confirmed tax demands on the supply of cotton seed oil cakes to traders.

The petitioner, a partnership firm engaged in extracting cotton seed oil cakes from cotton seeds and supplying the same to customers, approached the court after its arguments that the product, called khol in the open market of Gujarat, is used as cattle feed and has no other commercial use, were rejected by the GST officials.

During the course of an audit of the financial records, objections were raised by GST officials. They contended that the supply of cotton seed oil cakes is exempted from GST only if those are supplied for cattle feed and not if supplied to traders, which amounted to supply for further trade.

They argued that the petitioner failed to establish that the supply of the cakes was for cattle feed, and as such, short-paid GST.

The petitioner, on the other hand, argued that it had sold the cakes for cattle feed only, and it was not the petitioner’s responsibility to ascertain the end use of such supply, therefore, it had rightly availed the exemption.

The court ruled in favour of the petitioner, observing that the mere supply of cakes to traders would not determine the levy of GST, as the end use of the cotton seed is not in dispute.

It should be noted that the government issued a notification on September 29, 2017, exempting these cakes from GST. However, the authorities said the notification was not effective retrospectively, as the impugned case pertained to a period earlier than that.

Sandeep Sehgal, partner, tax, at consultancy firm AKM Global, said the ruling offers significant relief to businesses in the cattle feed supply chain, ensuring they can claim GST exemption regardless of whether the product is supplied to traders or directly to end users.